NEWS RELEASE
No.2009-C-454

May 25, 2009

R&I Places Nippon Accommodations Fund on Monitor v/downgrading
Rating and Investment Information, Inc. (R&I) has announced the following.
ISSUER:

Nippon Accommodations Fund Inc. (Sec. Code: 3226)
Issuer Rating
R&I RATING: (AA); Placed on the Rating Monitor with a view to downgrading

RATIONALE:
Nippon Accommodations Fund Inc. (NAF) is a real estate investment trust (J-REIT) that went
public in August 2006. The fund invests in "accommodation assets" primarily for rental purposes,
including dormitories, student apartments, serviced apartments, senior residences and corporate
housing. Mitsui Fudosan Co., Ltd. serves as its sponsor.
R&I has placed NAF on the Rating Monitor chiefly because 1) LTV ratios (Debt / Total assets)
have been high during the past year, standing in the mid-50% range, 2) It will remain difficult for
NAF to substantially reduce LTV ratios through a capital increase due to a continued slowdown in
the REIT market, and 3) The harsh environment for a capital increase has been impeding NAF's
external growth.
R&I assigned a rating of AA based on its expectations that LTV ratios will generally stay
between 40% and 50% and even if the ratios temporarily exceed 50% due to a series of property
acquisitions, they will be reduced through a capital increase, etc. and will not remain high for along period of time. Despite market fluctuations that will affect its capital increase, R&I expectedthat NAF will build track records by leveraging the strong creditworthiness of its sponsor, as wellas its competitive advantages in the residential REIT sector, and steadily expand its assets while
controlling LTV ratios. However, due to the drastic change in the REIT market, it has become
difficult for NAF, like its competitors, to increase its capital. Several factors, including LTV ratios,
actual control of LTV ratios, and asset size, have changed from those R&I originally expected whenassigning a rating.
Meanwhile, regardless of its LTV ratios, NAF has been refinancing its debts successfully.
Supported by its sponsor's creditworthiness, NAF maintains good relationships with major
financial institutions in Japan. While spreads are increasing like other REITs, NAF continues
stable procurement of unsecured funds, mainly at long-term fixed interest rates.
Occupancy rates of NAF's properties are solid. 92% of NAF's properties are located in the 23
wards of Tokyo. NAF's properties are mostly large with the average acquisition price of 3.2 billion
yen, and they are new, standing only for approximately 7 years on average (approximately 3 years,excluding Okawabata Apartment Communities). Furthermore, rentable units exceed 4200 and are
well diversified. Strong property competitiveness, diversified tenants and the Mitsui Fudosangroup's leasing capability are major components that support NAF's high occupancy rates.
While NAF's rating is on the Rating Monitor, R&I will examine future developments regarding
NAF's financial profile, particularly its control of LTV ratios. Based on the results, a new rating
will be announced. Nevertheless, as mentioned above, NAF's cash flow and financing are stable.
Even if the rating is downgraded, it is highly probable that the downgrade will be only one notch.

Rating and Investment Information, Inc. Nihonbashi 1-chome Bldg., 1-4-1, Nihonbashi, Chuo-ku, Tokyo 103-0027, Japan
Investors Service Division TEL.03-3276-3511 FAX.03-3276-3413 http://www.r-i.co.jp
Credit ratings are statements of R&I’s opinions regarding an issuer’s general capacity to repay its financial obligations and its individual obligations (creditworthiness) and are not statementsof fact. Further, R&I does not state its opinions about any risks other than credit risk, give advice regarding investment decisions or financial matters, or endorse the merits of any investment.
R&I does not undertake any independent verification of the accuracy or other aspects of the related information when issuing a credit rating and makes no related representations or warranties.
R&I is not liable in any way for any damage arising in relation to credit ratings (including amendment or withdrawal thereof). As a general rule, R&I issues a credit rating for a fee paid by theissuer. For details, please refer to http://www.r-i.co.jp/eng/about.html.

©Rating and Investment Information, Inc.

NEWS RELEASE
The primary rating methodologies applied to this rating are provided at "R&I J-REIT Rating
Methodology" and "Basic Methodologies for R&I's Credit Rating". The methodology is available at
the web site listed below, together with other rating methodologies that are taken into
consideration when assigning the rating.
http://www.r-i.co.jp/eng/rating/st/methodology.html
http://www.r-i.co.jp/eng/rating/rating/methodology.html
R&I RATINGS:ISSUER:
R&I RATING:
ISSUE:

R&I RATING:

Nippon Accommodations Fund Inc. (Sec. Code: 3226)(AA); Placed on the Rating Monitor with a view to downgrading
Preliminary Rating for the Shelf Registration scheme
Bonds to be Rated: Corporate Bonds
Issue Amount: Yen 100,000 million (Shelf Amount)
Issue Period: Two years from Jul 18, 2007(AA); Placed on the Rating Monitor with a view to downgrading

LONG-TERM ISSUE RATING: Issue Date
Redemption
Issue Amount (mn)Unsec. Str. Bonds No. 1
Nov 15, 2007
Nov 14, 2014
Yen 10,000
R&I RATING:(AA); Placed on the Rating Monitor with a view to downgrading
In principle, an Issuer Rating is R&I's opinion on an issuer's overall capacity to repay itsfinancial obligations as agreed and is assigned to all issuers. The rating of individual obligations
includes the prospect of recovery and reflects the terms and conditions of the agreement and it may
be lower or higher than the Issuer Rating.

Rating and Investment Information, Inc. Nihonbashi 1-chome Bldg., 1-4-1, Nihonbashi, Chuo-ku, Tokyo 103-0027, Japan
Investors Service Division TEL.03-3276-3511 FAX.03-3276-3413 http://www.r-i.co.jp
Credit ratings are statements of R&I’s opinions regarding an issuer’s general capacity to repay its financial obligations and its individual obligations (creditworthiness) and are not statements
of fact. Further, R&I does not state its opinions about any risks other than credit risk, give advice regarding investment decisions or financial matters, or endorse the merits of any investment.
R&I does not undertake any independent verification of the accuracy or other aspects of the related information when issuing a credit rating and makes no related representations or warranties.
R&I is not liable in any way for any damage arising in relation to credit ratings (including amendment or withdrawal thereof). As a general rule, R&I issues a credit rating for a fee paid by theissuer. For details, please refer to http://www.r-i.co.jp/eng/about.html.

©Rating and Investment Information, Inc.